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For more information on programs and publications of the Mackinac Center for Public Policy, please contact: Mackinac Center for Public Policy 140 West Main Street P.O. Box 568 Midland, Michigan 48640 989‑631‑0900 Fax 989‑631‑0964 www.mackinac.org [email protected] © 2009 by the Mackinac Center for Public Policy, Midland, Michigan ISBN: 1‑890624‑90‑X | S2009‑10 140 West Main Street P.O. Box 568 Midland, Michigan 48640 989‑631‑0900 Fax 989‑631‑0964 www.mackinac.org [email protected] The Mackinac Center for Public Policy Michigan School Privatization Survey 2009 By James M. Hohman and Eric R. Imhoff ©2009 by the Mackinac Center for Public Policy Midland, Michigan Guarantee of Quality Scholarship The Mackinac Center for Public Policy is committed to delivering the highest quality and most reliable research on Michigan issues. The Center guarantees that all original factual data are true and correct and that information attributed to other sources is accurately represented. 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Michigan School Privatization Survey 2009 iii Contents Introduction ..........................................................................................................1 Methodology ........................................................................................................2 2009 Survey Results .............................................................................................3 Food Service ..................................................................................................................4 Custodial Service ...........................................................................................................5 Transportation Service ..................................................................................................6 Districts That Brought Services Back In-House ............................................................8 Other Services Contracted ............................................................................................9 Satisfaction With Contracting .......................................................................................9 Revisions in Results and Population ..................................................................10 Appendix A: Map of Survey Findings by School District ..................................11 Mackinac Center for Public Policy Michigan School Privatization Survey 2009 1 Introduction With Michigan’s public school districts facing a decline in per-pupil funding, more districts are contracting out for at least one of the three major school support services — food, custodial and transportation — than ever before. This year’s survey of school districts found that 44.6 percent of all Michigan school districts contract out for at least one of these services, a 5.6 percent increase over 2008. This year, new contracts alone are expected to save $6.9 million. Since 2001, the Mackinac Center has surveyed public school districts in Michigan about their use of contractors in providing support services. Each year, more districts contract out to save money and improve services. Contracting out is especially pertinent as districts face ongoing revenue crunches. As state-based tax revenue has declined in Michigan’s receding economy, school revenue correspondingly declined. Consequently, based on average revenue of approximately $13,000 per pupil, most schools face a 3 to 4 percent reduction in revenue in 2009-10 and prospects of a larger reduction in 2010-11. Contracting out and managing a district’s contractors has never been more important, and the Mackinac Center continues to provide the most detailed and comprehensive information about the use of support service contractors in the state. Of course, districts have always used outside companies to provide goods and services, from constructing buildings to buying pencils to servicing copiers. But many districts did not use contractors to provide school support services until Public Act 112 of 1994 made contracting for these services a prohibited subject of bargaining. Before that, a union could negotiate a clause preventing a district from exploring contracting out non-core services, meaning the district would continue to employ workers covered by collective bargaining agreements that carried ever-increasing legacy costs. While a number of districts had privatized some services before 1994, PA 112 allowed more flexibility for districts to begin soliciting bids for services and to gain additional leverage at union negotiating tables. But the extent to which Michigan public school districts contracted out was unquantified. In 2001, the Mackinac Center began tracking districts that contracted out, first biennially and later annually. Seven surveys have been completed: in 2001 and 2003, and every year from 2005 to 2009. Mackinac Center for Public Policy Michigan School Privatization Survey 2009 2 Methodology All 551 public school districts in Michigan cooperated with this year’s survey. The number of districts decreased by one this year as White Pine Public Schools merged with the Ontonagon Area School District after experiencing low student counts over the past few years. The privatization survey was conducted from May 26 through July 29, 2009, with the majority of responses received by telephone. The respondents were superintendents, business managers and assistant superintendents. Some districts requested a written copy of the survey questions, and others asked for a Freedom of Information Act request. These were submitted when requested. The survey included questions on whether the district contracted out for support services and whether it had brought services back in-house.* If the district changed * As part of other Mackinac its service provision by either outsourcing or in-sourcing, they were asked to give Center education survey work, we ask whether the district uses their reasons, to name the company that provides the service (if applicable) and a MESSA plan to cover health to define the differences in costs between the in-house and contracted services. benefits for teachers, whether recall petitions have been submitted against the district’s Districts that switched to a contracted service were asked to provide documentation school board members, and on the cost savings. Not all provided comprehensive costs analyses, nor did they whether the district posts its checkbook register online. all use the same methods for estimating costs. Nevertheless, results provide context for annual cost differences between in-house and contracted services for the districts that contracted out this year. We also asked districts whether they were satisfied with their contractors, regardless of whether they were new to contracting. Determining whether a district uses private provision of services requires some judgment. Some districts use private contractors for only portions of services, as is the case for districts that contract out for food service management while keeping their own workforces to operate the kitchens and cafeterias. Districts also may hire companies for cleaning only certain buildings and grounds, or contract out for just special education transportation. Some districts contract with another school district or another governmental agency for all or part of a service. A district is only counted as having privatized when it hires a private company to provide all or part of a normal service to the district. This also means that school districts that contract out with other districts and municipal governments are not included, as is the case when districts share a food service manager, as Adrian Public Schools and Blissfield Community Schools do. It would also exclude districts that contract with municipal transportation services for busing. Mackinac Center for Public Policy * As part of other Mackinac Center education survey, we ask whether the district uses a MESSA plan to cover health benefits for teachers, whether recall petitions have been submitted against the district’s school board members, and whether the district posts its checkbook register online. Michigan School Privatization Survey 2009 3 This year’s survey found that 80 of the 162 districts that contract out for food service maintain their own food service labor force. Seven of the 38 transportation contracts are for management only, and four are for labor only. 2009 Survey Results • 44.6 percent of districts (246 out of 551) contract out for food, custodial or transportation services. • 29 food, custodial or transportation services were outsourced this year. • Eight districts insourced services this year. • New contracts alone were estimated to save taxpayers $6.9 million statewide. Privatization continues to increase this year as 246 districts contracted out for food, custodial or transportation services. Contracting has increased 44 percent since 2001 and displays a steady trend, growing an average of 6.3 percent each year. Graphic 1: Outsourcing by Michigan School Districts 50 40 233 246 222 districts districts 30 172 196 dis2t0ri7c ts districts Districts 20 districts districts Percentage of 100 2001 2003 2005 2006 2007 2008 2009 Note: The number of districts that responded each year varied. There are 306 districts that did not contract out for any of the three main support services. Five of those districts ended previous contracting arrangements. Three other districts brought services back in-house but had contracts in place for other services. The relatively small increase in the percentage of districts that contract out services hides some of the growth in contracting that is occurring in Michigan school districts. If a district contracted out food services when it already had a custodial service contract, for example, it would still count only once in these figures. Overall, there were 29 new contracting arrangements. This year, the Mackinac Center requested cost analysis sheets from districts that began new contracting arrangements to see how much outsourcing is expected to save districts. Altogether, contracting was expected to save Michigan taxpayers nearly $7 million. Mackinac Center for Public Policy Michigan School Privatization Survey 2009 4 Food Service • 29.4 percent of districts (162 out of 551) contract out for food service. • Seven districts began contracting out the service. • New food service contracts are expected to save districts $649,600. Food service continues to be the most frequently contracted, with 162 districts using private contractors. Seven new districts contracted out this year. Graphic 2: Districts Contracting Food Service 30 164 29 districts 161 162 Districts 28 dis1t5ri8c ts dis1t5ri8c ts districts districts Percentage of 2276 dis1t4ri1c ts 2003 2005 2006 2007 2008 2009   Note: The number of districts that responded each year varied. There was a slight increase in the percentage of districts that contracted out for food service this year. This stands in contrast with the 2008 survey, when food service contracting numbers decreased. Overall, new contracts for food services are expected to save Michigan school districts $649,600 this year. Districts’ expected savings range from $9,300 for Charlevoix Public Schools to $414,600 for Troy School District. In Charlevoix and Okemos public schools, the food service contractors will not manage the district’s food service staff, but will employ the former in-house staff, thereby foregoing the necessity of the districts contributing to the state’s public school employee pension fund. Savings will depend on how many employees are hired. Glenn Public Schools is a 48-pupil district in southwest Michigan. It began an arrangement with a local restaurant that cooks hot meals for students to buy once a week. The district had not provided food services at all before this, and students had simply brought their own lunches. Districts new to food service contracting Savings Troy School District $414,600 Godwin Heights Public Schools $163,800 Au Gres-Sims School District $16,800 Charlevoix Public Schools $9,300 Peck Community Schools $45,000 Okemos Public Schools $1,000 Glenn Public Schools $0 (new service) Mackinac Center for Public Policy